PPC Mistake #26: CTR vs. CR: What's Better than Getting More Clicks?

New to PPC? I mean Pay Per Click? Welcome to a host of acronyms.

You probably know CTR, or Click Through Rate. This is the percentage of clicks resulting from your ad views (impressions) that click on your ad. Then they end up on your ad or keyword's destination page.

So the goal of PPC optimization is to increase CTR and decrease Cost Per Click, right? After all, the most important thing is getting traffic, right?

No.

Profit is the most important thing.

Don't get me wrong- of course you need traffic to get sales or leads. After your ad viewer clicks through to your destination page, you want them to buy something or become a lead, right? And the percentage of those clickers who become buyers or leads is the Conversion Rate (CR).

So you want a really high CR, right? After all, the number of sales and leads is the most important thing, right?

No.

Profit is the most important thing.

So what you really need to maximize is CR multiplied by CTR. That turns out to be conversions per impression. (conversions/click * clicks/impression = conversions/impression)

To maximize PPC profit, you test ads and keywords and compare both their CTR and CR.

Sometimes an ad can have a higher CTR but still be the loser.

Let me illustrate:

Ad 1:
2.29% CTR, 0.75% CR

Ad 2:
1.19% CTR, 2% CR

People focused on CTR click through rate (and people not tracking conversions) would choose Ad #1 as the winner.

But with the multiplied results which is better?

Ad 1: 0.017% conversions/impression
Ad2: 0.024% conversions/impression

Ad 2 will bring you 38.6% more conversions than Ad 1 for the same set of keywords. Ad 1 will give you more clicks, but so what? In your profit and loss statements, do you put money, or clicks? Ask your accountant. ;-)

NOTE: The reason I didn't show any ad copy is not only to protect clients, but because I believe we can rationalize why any particular copy wins after the fact- whether that's the true cause or not, we'd have to test! Trust the numbers- all theories about ad copy are hypotheses for the next test.

ALSO: We can go further toward the best KPIs (Key Performance Indicators) into cost/conversion, ROAS (Return On Ad Spend) - Omniture is particularly helpful in tracking ROAS for PPC - and total profit, but that's for another post.